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The formation of a coalition government in Austria that includes the rightwing Freedom Party headed by Mr. Joerg Haider is a potential nightmare for Europe. The prospect of an extremist party joining the Cabinet in Vienna has forced other members of the European Union to examine their own past. It has been a wrenching experience — and one not without some measure of hypocrisy for nations who profess to value democracy. This could prove to be a defining moment for the EU, as it tries to identify the threads that bind the community. The EU could be embarrassed if it is ignored, however.

In elections last year, the Freedom Party placed second behind the Social Democrats. That party refused to form a coalition with Mr. Haider. But after the Social Democrats failed to draw up a Cabinet with their old partners, the People’s Party, a conservative group, the two rightist parties formed their own coalition. Reluctantly, Austrian President Thomas Klestil swore in the new government, including six ministers from the Freedom Party, late last week.

That jolted Europe. Governments throughout the EU fear that the legitimacy given to Mr. Haider — who has praised the Third Reich’s “orderly employment policies” and the Waffen SS — could invigorate like-minded politicians across the continent. Fears of a revival of fascism and racism were not diminished by the fact that Mr. Wolfgang Schuessel, head of the People’s Party and a respected foreign minister, would be chancellor. Mr. Haider’s promise to stay out of the Cabinet and continue to serve as governor of the province of Carinthia provided little reassurance, given his iron grip on the party.

In response, 14 EU members took the unprecedented step of threatening a political quarantine of Austria. They justified that action on the grounds that Mr. Haider’s policies violated the Treaty of Amsterdam, which sets as the EU’s fundamental principles democracy and respect for law, civil rights and the rights of minorities. Governments that violate those principles can have their voting rights suspended.

After the new government took office, the 14 EU governments promptly carried out their threat and froze all bilateral ties with Vienna. Israel withdrew its ambassador from the Austrian capital and the United States recalled its envoy for “consultations.” The European group of mainstream conservative parties requested that the People’s Party withdraw from the organization and threatened expulsion if it refused.

Even many Austrians were alarmed at the turn of events. The swearing-in set off violent demonstrations in Vienna. Mr. Klestil made his views plain by rejecting two of Freedom’s proposed ministers and his stone-faced distaste was visible in the investing ceremony.

Mr. Klestil drew up the declaration, signed last week by the two parties, in which they accepted Austria’s responsibility for Nazi crimes during World War II. It is right to ask how valuable a pledge will be if Mr. Haider is a true believer, but he is not the real danger. The anger against Austria could create a backlash there, and Mr. Haider could be the beneficiary. Some worry that he will provoke a crisis soon in order to pick up more votes in another election.

Many Austrians feel picked on. After all, they chose their leaders and there is no doubt about their democratic credentials. Until they have violated European values, punishment seems premature. Other European parties have equally distasteful blind spots, such as the communist parties that still yearn for the glory days of the Soviet Union. They also ask how the EU can condemn them when an extremist such as Mr. Jean-Marie Le Pen is a member of the European Parliament.

That is all true, but inaction would have been much worse. European history is pitted with failures to respond to authoritarian threats, starting in the 1930s and continuing through the Balkan blood baths of the last decade.

Mr. Haider has forced Europe to look at itself and define the essence of the European identity. The answer is that the EU is not just a market, but a community of shared values. If Mr. Haider repudiates those values, then he does not belong in the community and cannot share its benefits. That is the theory.

The problem is that the line between bilateral contacts and EU functions — which have not been suspended yet — is hard to maintain, especially when “informal” meetings are encouraged to make it easier for member states to work with each other. This weekend, social affairs ministers go to Portugal for just such a get-together: Austria’s minister, from the Freedom Party, is invited. If Vienna digs in its heels, the EU may be forced to deliver — or back down. Neither choice is appealing, especially if EU decison-making is imperiled as a result.

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